China: Trade surplus climbs to multi-year highs – UOB

Economist Ho Woei Chen, CFA, at UOB Group, assessed the latest trade balance figures in the Chinese economy.

Key Quotes

“China’s exports (in USD-terms) fell -3.3% y/y in May reversing from a gain of +3.5% y/y in April. However, this was better than consensus forecast of -6.5% y/y and was partly due to a higher base of comparison in May 2019.”

“However, the imports contraction deepened to -16.7% y/y in May from -14.2% y/y in April and was well-below consensus forecast of -7.9% y/y. The declines were led by large falls in China’s imports of transportation equipment such as aircraft and motor vehicles as well as commodities including petroleum and coal products whereas imports of food such as soybeans rose in May.”

“With the let-down in imports, China’s trade surplus rose to US$62.9bn from US$45.3bn in April, the highest since January 2016.”

“Year-to-date, China total exports contracted by -7.7% y/y and imports by -8.2% y/y… On aggregate, China’s trade surplus with the US has narrowed compared to US$110.4 bn in the same period in 2019. We expect the trade surplus to widen as US demand recovers following the reopening of its economic sectors.”

“Overall outlook for China’s trade is expected to continue to improve as more economies emerge from their COVID-19 lockdowns… The demand outlook is expected to improve more materially in the second half of the year to drive export gains in China.”